Wall Street Journal, October 20, 2011
A worker shovels coffee in El Paste, El Salvador. Rough weather there and elsewhere in Central America has threatened production and transport. Torrential rains are pounding down on coffee production and trade routes in Central America, supplier of 10% of the world’s coffee beans.
This rainy season is shaping up to be a destructive one in countries like Honduras and Guatemala, which grow mild-flavored arabica beans covered by coffee connoisseurs. High winds are stripping leaves from the coffee trees, exposing not-yet-ripe coffee to the elements. Also, ripened coffee is falling onto waterlogged soil before it can be carefully harvested, and those beans are often so damaged they can’t be sold.
That is driving the price of coffee higher. Futures are up 5.7% since hitting a nine-month low earlier this month, including Wednesday’s jump of 4.65 cents, or 2%, to $2.3615 a pound on Intercontinental Exchange.
Félix Regalado, who cultivates coffee on a small farm in Honduras, the largest coffee producer in Central America, and thousands of other coffee farmers are about to start harvesting the bulk of Central America’s crop at a time when supplies are tight. Stockpiles of arabica coffee in exchange-certified warehouses have shrunk nearly 60% since September 2009.
Big coffee roasters were looking to this upcoming harvest in Central and South America for relief from three years of lackluster global production. However, the severe rains, which have already claimed scores of lives across the region, are dashing such hopes.
“The coffee is falling from the plants, both ripe and unripe berries,” said Mr. Regalado. The berries contain the beans that are cleaned and roasted to make coffee. Not only is the actual coffee damaged, but weather conditions make it difficult for farmers to harvest and get the beans to storage terminals or ports.
“When it rains like this, we can’t cut,” Mr. Regalado said. “And when it’s slippery, we have to transport on horseback.” In El Salvador, 2% of the 1.3 million 60-kilogram (about 130-pound) bags that were forecast to be exported this year have been lost to the rains, said Ana Elena Escalante, executive director of the Salvadoran Coffee Council. El Salvador’s President Mauricio Funes said the country had received a record amount of rainfall, surpassing what fell during Hurricane Mitch in 1998, one of the region’s most costly natural disasters.
The heavy rains took some in the coffee industry off-guard. “It wasn’t expected,” said Ricardo Villanueva, chairman of the Guatemalan National Coffee Association. “It’s impossible to forecast.”
Guatemala is the region’s second-largest grower, and Mr. Villanueva said crop loss is minimal but that “infrastructure damage is terrible.” The wet weather is spreading beyond just Central America. The coffee federation in Colombia has blamed the heavier-than-usual storms for a drop in production but is keeping its target of nine million bags for the year.
“There’s certainly going to be a logistical issue, and a supply issue could develop,” said Jack Scoville, a vice president at Chicago-based Price Futures and a dealer of Salvadoran coffee. “It would be…supportive for prices. I think they’re headed back to the $2.70 [a pound] area.”
—Darcy Crowe in Bogota contributed to this article.
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